President Jair Bolsonaro announced this Monday (6), in a statement to the press, a proposal to reduce state taxes on fuel in exchange for compensation for lost revenue with federal resources. The idea is to approve a proposal for a constitutional amendment (PEC) that authorizes states to zero the Tax on the Circulation of Goods and Services (ICMS) levied on diesel oil and cooking gas (LPG). In doing so, state governments would receive financial compensation equivalent to the revenue that would no longer be collected. 
“We have zeroed PIS/Cofins [imposto federal] since last year and as long as the governors understand that they can also zero the ICMS, we, the federal government, will reimburse the governors for what they will not collect”, said Bolsonaro, at Palácio do Planalto. During the announcement, he was accompanied by the presidents of the Chamber of Deputies, Arthur Lira (PP-AL) and of the Senate, Rodrigo Pacheco (PSD-MG), in addition to some of his main ministers, such as Paulo Guedes (Economy), Adolfo Sachsida (Mines and Energy) and Ciro Nogueira (Casa Civil) Before the press release, they were meeting at the federal government headquarters to discuss the measures.
To be viable, the government’s proposal needs to secure the approval of the project that limits the application of the ICMS rate on goods and services related to fuels, natural gas, electricity, communications and public transport. The complementary bill (PLP), which passed through the Chamber and is now is under review in the Senatesets the rate of this tax at a maximum of 17% on these sectors, and also provides for compensation mechanisms for the states.
“We, here, hope, as it is democratic, that the Senate has tranquility, autonomy and sensitivity in the PLP 18. And that we, after that, will process a PEC that authorizes the federal government to reimburse the states that are available to zero these state taxes, without prejudice to the governors”, said the president of the Chamber, Arthur Lira.
exceptional situation
According to the Minister of Economy, Paulo Guedes, the current situation requires collaboration between the Union, states and municipalities. “Everyone has to collaborate. States and municipalities are in a situation they have never been in before. All in balance, in blue, paying suppliers. They have their bills up to date, they are even giving salary increases. We are renewing our commitment to the protection of the Brazilian population, with cooperation between federative entities”, he explained, during the speech.
According to the government’s idea, the PEC would serve to compensate the states with an eventual zeroing of ICMS rather than staying below the 17% ceiling, if the Senate approves the bill in progress in the House. “The idea is that a part comes through this ceiling of 17%, that is, the collaboration of states and municipalities. And the federal government, on the other hand, transferring resources for any tax reduction that goes beyond that”, explained the minister.
Also according to Guedes, the measure would be valid until December 31 of this year. He did not say what the budgetary impact of the reimbursement to the states will be. “We have extraordinary revenues that have not yet been released in the Budget, this transfer to entities will be limited to these revenues”, he informed.
Economy Minister Paulo Guedes said that the measure would be valid until December 31 of this year – Fabio Rodrigues-Pozzebom/ Agência Brasil
Senate
The Senate president stated that the government’s proposals are welcome and that the matter will be widely discussed in the House, including taking into account the claims of the states. Regarding the progress of the complementary bill that limits the ICMS rate, he said he expected a brief definition.
“We hope, very soon, to have a definition in relation to this report by Senator Fernando Bezerra Coelho, but, in fact, an opportunity for dialogue, consensus and, what is more important, to favor the final consumer in relation to the very serious problem that we have today, which is the excessive price of fuel at the pump”, said Rodrigo Pacheco.
gasoline and ethanol
President Jair Bolsonaro also stated that the federal government will zero federal taxes (PIS/Cofins and Cide) on gasoline and ethanol, to try to reduce the value at the pump. These taxes are zero on diesel and cooking gas.
“If there is an understanding on the part of the senators, if the complementary bill is approved, if an amendment to the Constitution is enacted very quickly, this would immediately take effect at the end of the line, this reduction in the tax burden to face this problem. outside Brazil, which has repercussions for all of us here”, emphasized Bolsonaro.
